A broken contract can put a business in a precarious situation. Financial losses, project delays, and damaged relationships can result when one party fails to do what they promised.
However, Kentucky law offers several options for the non-breaching party to protect their interests. Understanding these remedies can help businesses recover their losses and move forward when someone doesn’t honor a contract.
Damages for breach of contract
The most common solution for breach of contract is awarding damages. Damages involve monetary compensation to make up for the losses the breach caused. In Kentucky, these fall into a few categories.
Compensatory damages aim to put the non-breaching party in the same position they would have been in had the breaching party fully performed its contractual obligations. This can include covering direct costs, lost profits, or other financial losses linked to the breach.
On the other hand, punitive damages have the goal of punishing the party responsible and preventing similar behavior in the future. These are rare, and courts only award them when the breach is especially harmful or intentional.
Another type is liquidated damages. This is when a contract lists a penalty that a breaching party must pay. If the court finds this amount fair and reasonable, it enforces those liquidated damages.
Other remedies available
Aside from damages, Kentucky law offers other ways to handle a breach of contract. One option is specific performance. In certain cases, the court may require the breaching party to carry out their obligations as written in the contract. This remedy is more common when the agreement involves unique goods or services that are not easily replaceable.
Alternatively, the non-breaching party could also cancel the contract and seek restitution. This involves returning both parties to the positions they were in before they made the contract.
Another possibility is reformation. If the contract contains a mistake that caused the breach, the court may choose to rewrite it. This action ensures that the contract reflects the true intentions of both parties.
Contracts are a regular part of doing business, so companies in Kentucky should be aware of these remedies. Taking a proactive approach when forming contracts can help minimize the impact of a breach and provide a clear path to resolving or litigating disputes.